By Lisa Kerner
Charlotte, N.C., June 23 - Republic Services, Inc. and Allied Waste Industries, Inc. will combine to form a waste and environmental services company with an expected total market capitalization of approximately $12 billion, it was announced on Monday.
Both companies' boards of directors have approved the transaction, which is slated to close by the fourth quarter of 2008.
Under the companies' merger agreement, Allied Waste shareholders will receive 0.45 shares of Republic Services common stock for each share of Allied Waste common stock held.
The offer is a premium of about 17% over the average closing price of Allied Waste's stock for the previous 30 trading days, based on the unaffected closing stock prices of both companies on June 12, a Republic Services news release stated.
Regulatory reviews and approvals are expected to be completed in four to six months.
A form 8-K filed with the Securities and Exchange Commission reported a $200 million termination fee is part of the agreement.
Republic Services will issue about 198 million shares of common stock to Allied Waste shareholders, representing roughly 52% ownership of the combined company, a Republic Services news release said.
In addition, Republic Services expects to put in place a new unsecured senior credit facility and issue new senior notes. The existing senior notes of both Republic Services and Allied Waste will remain outstanding, the release said.
Republic Services noted that the combined company will have more than 35,000 employees and more than 13 million customers in 40 states and Puerto Rico.
It is anticipated that the merger will generate approximately $150 million in net annual synergies and will be accretive to Republic Services' earnings per share in the first year following the merger's completion.
"The vertically integrated model of the combined company - linking collection, transfer, recycling and disposal services - enhances cash flow, earnings and return on capital for our shareholders, while reducing our risk," Republic Services chairman and chief executive officer James E. O'Connor noted in the release.
"Our strategic focus remains on improving return on invested capital, reducing debt and generating higher levels of free cash flow," O'Connor added.
Once the merger is complete, O'Connor will become chairman and CEO of the combined company, to be known as Republic Services, Inc. and based in Phoenix.
Allied Waste president and chief operating officer Don Slager will become president and COO of the combined company.
The board of directors of the combined company will consist of 11 members, including O'Connor, five independent directors from the current Republic Services board of directors and five independent directors from the current Allied Waste board.
The combined company will trade under the ticker symbol "RSG" on the New York Stock Exchange.
Merrill Lynch & Co. advised Republic Services and also provided a fairness opinion to the company.
Allied Waste was advised by UBS Investment Bank, which provided a fairness opinion.
Fort Lauderdale, Fla.-based Republic Services provides environmental services including solid waste collection, transfer and disposal services in the United States.
Allied Waste is the second-largest non-hazardous solid waste services company in the United States. The company is based in Phoenix.
| Acquirer: | Republic Services, Inc.
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| Target: | Allied Waste Industries, Inc.
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| Announcement date: | June 23
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| Price per share: | 0.45 shares of Republic Services common stock
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| Termination fee: | $200 million
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| Expected closing: | Fourth quarter of 2008
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| Stock price for acquirer: | NYSE: RSG: $31.19 on June 20
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| Stock price of target: | NYSE: AW: $13.56 on June 20
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